EU Effort to Impress Oil Embargo on Russia Crude oil futures volatility continues to rise

Message surface

According to the Russian satellite network: Lithuanian Foreign Minister, the EU has begun work on the sixth round of sanctions against Russia, including oil imports
.

Irish Foreign Minister: The European Commission is working to impose an oil embargo on Russia as part of
the next potential sanctions package.

Frans Timmermans, the EU's head of climate policy, said on Sunday that the EU could set more ambitious targets for the transition to renewable energy, and the community is now actively looking for alternatives to Russian oil and gas.
The EU's 27 member states had previously agreed to reduce net greenhouse gas emissions by 55 percent from 1990 levels by 2030, moving toward
a net zero target by 2050.

According to the news of Sinopec Jiangsu Oilfield on the 11th, Sinopec has started the construction of Zhujiadun gas storage reservoir to further enhance the seasonal peak regulation and emergency reserve capacity of natural gas and effectively ensure the gas supply demand
in the Yangtze River Delta region.
Zhujiadun Gas Storage - The main project is based on the Zhujiadun gas reservoir in Jiangsu Oilfield, with a design capacity of 662 million cubic meters and a working gas capacity of 330 million cubic meters, which is another gas storage built by Sinopec in the Yangtze River Delta
.

Institutional perspective

Tokai Futures:

With the release of the US strategic reserve of 180 million barrels and other consumer countries of 0.
6 billion barrels, market concerns about supply have eased
in the short term.
At the same time, under the fifth round of EU sanctions against Russia, the import of Russian coal has been banned, and most Russian trucks and ships have been banned from entering the EU
.
Germany, which previously said it was on Ban on Russia's energy sector, said on Friday that Germany could stall oil imports from Russia this year
.

According to the Russian Ministry of Energy, Russian production in the first week of April was about 10.
5 million b/d, a decrease of 4.
5%
from normal.
Under the impact of the epidemic and macro, the structure of crude oil has weakened significantly, and Brent's monthly difference in March has weakened by $9 compared to late March, resulting in a decline
in the oil price center.
Oil price volatility will continue to rise in the near future, and short-term absolute prices are not recommended to operate
.

Guotai Junan Futures:

In the past week, the center of gravity of oil prices has dropped sharply, Brent once fell below $98 / barrel, SC once approached 600 yuan / barrel, the trend is basically consistent
with our pre-Qingming Festival prediction.

In our view, after the IEA launched a cumulative 240 million barrels of dumping plan over the next six months, the market has a blunt feeling about the supply shortage in the Russian-Ukrainian conflict, and the probability of oil prices re-trading the bearish decline under overseas austerity in the coming week is even greater
.
As the Fed raised interest rates and reduced the balance sheet in the face of high inflationary pressures (one or more interest rate hikes of 50BP, the balance sheet is expected to shrink by $1.
1 trillion in one year), the dollar index broke through the 100 mark upwards, forming a strong suppression
on oil prices.

At the same time, the sharp rise in the US 10-year bond interest rate and the inversion of long-term and short-term interest rate spreads have raised concerns about the economy or the gradual start of recession, after all, inflation performance has historically lagged behind the economic inflection point
.
Objectively speaking, the current supply of crude oil market is still tight, and we do not believe that the average price of oil prices will fall sharply throughout the second quarter, and the probability of low inventory and low supply will remain high
.

However, at a time when the situation in Russia and Ukraine has slowed down and the US dollar has accelerated its return, the core of the market's current divergence over oil prices is whether it is necessary to release the bearish liquidity
tightening quickly in the short term.
If you choose the logic of trading, the disk is likely to replicate the trend of November 2021 and open a trend pullback
.
Such a pullback, once triggered, is likely to quickly lower inflation expectations and lead to a further strengthening of real interest rates when the Fed's aggressive balance sheet reduction attitude has not changed, reinforcing the downward drive
for oil prices.

If, in the process, there is a return of Iranian crude oil or the resumption of Russian crude oil exports (Bloomberg reports that Shell has found a way to bypass sanctions to import Russian crude oil), the bearish resonance effect on oil prices will be very obvious
.
Of course, considering that the bearish at the monetary level and demand side is more based on market expectations, which is greatly affected by policies and the epidemic, and may reverse at any time, it is still necessary to guard against the upside risk
of oil prices for a long time in the second quarter.